Kaila Corporation purchased a truck for 225,000 on January 1, 2017. It was originally depreciated on a straight-line basis over 10 years with an assumed residual value of 45,000. On December 31, 2019, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2019) and the residual value to 7,500. What was the depreciation expense for 2019?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Kaila Corporation purchased a truck for 225,000 on January 1, 2017. It was originally
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